Consumers and Competition A consumer welfare analysis of three retail markets in 14 EU member states About Consumers International (CI) Consumers International (CI) is the only independent global campaigning voice for consumers With over 220 member organisations in 115 countries, we are building a powerful international consumer movement to help protect and empower consumers everywhere Consumers International is a not-for-profit company limited by guarantee, registered in England (reg no 4337856) For more information, visit: www.consumersinternational.org Consumers and Competition: A consumer welfare analysis of three retail markets in 14 EU member states ISBN: 1-902391-65-9 Published by Consumers International in September 2007 © Consumers International 24 Highbury Crescent London N5 1RX, UK email: consint@consint.org www.consumersinternational.org This publication is produced as part of a year project “A Consumer Welfare Analysis of the retail Distribution Market in EU Member States” which was co-ordinated by Consumers International and involved the participation of 14 European Consumer Organisations The project was partly funded by the European Commission (DG Sanco) but does not necessarily reflect the views of the European Commission Consumers and Competition A consumer welfare analysis of three retail markets in 14 EU member states Credits and acknowledgements Report written by Kate Scribbins (Market surveillance section) Orit Dayagi-Epstein (Legislation section) Comments on the report were kindly received from Willemien Bax (BEUC) Julian Edwards Dominique Forest(BEUC) Alena Kozakova (Which?) Philip Marsden (BIICL) Suzanne Natelson(CI) Bjarne Pedersen (CI) Peter Whelan (BIICL) Robin Simpson Report data and comments provided from the following Project Partners Cyprus Kypriakos Syndesmos Katanaloton (Cyprus Consumers Association) Czech Republic Sdruzeni Obrany Spotrebitelu Ceske Republiky (SOS Consumers Defence Association Of The Czech Republic) Denmark Forbrugerrådet (Danish Consumer Council) France Consommation, logement et cadre de vie (CLCV) Germany Verbraucherzentrale Bundesverband (VZBV – Federation of German Consumer Organisations) Greece New INKA (New Consumers’ Institute) Italy Centro Tecnico Regionale Di Ricerca Sul Consumo Europeo (CTRRCE – Regional Technical Centre For Research On European Consumption) Lithuania Lithuanian National Consumers Federation Malta Ghaqda Tal-Konsumaturi (Consumers’ Association) Netherlands Consumentenbond (Consumers’ Association of Holland) Poland Stowarzyszenie Konsumentow Polskich, Skp (APC – Association Of Polish Consumers) Portugal Associaỗỏo Portugesa Para A Defesa Do Consumidor (DECO – Portuguese Association For Consumer’s Protection) Slovenia MIPOR – International Consumer Research Institute Spain Mag Estudios De Consumo, S.L (Mag Consumers’ Studies Centre) UK Which? UK British Institute for International and Comparative Law Contents Executive Summary Market survey results Legislation survey results Introduction Background Project overview Market surveillance Aim The research process Methodology: establishing the framework Methodology: specific products Key findings Paracetamol Printer ink 13 Petrol 16 Competition policy and monitoring 20 Aim 20 Methodology 20 Key findings 21 Conclusions 28 Institutional and legal framework 28 Specific markets 29 Recommendations 30 To improve the competition environment 30 To improve specific markets 32 Appendix 33 I – Project participants 33 II – Results tables for the petrol survey 34 Footnotes can be found at the end of each chapter Executive Summary The effective implementation of competition Market survey results policy is critical to the world’s consumers Competitive markets benefit consumers by Paracetamol enabling them to obtain best value, and econom- In many EU countries paracetamol is sold through ic performance generally by improving efficiency pharmacies only, and in some countries the full range of products and their prices are not on dis- Recently, perhaps as a result of trade and market liberalisation, anti-competitive practices have received increasing attention from regulators and from consumers This is because their effect can be to make goods and services more expensive, even those that are essential for survival, and to play These sales practices restrict consumer choice and have implications for the development of the Single Market In many cases consumer organisations are not involved in decisions about how over-the-counter (OTC) medicines are sold, while business interests are invited to participate lower their quality The consumer interest lies in Generic paracetamol tends to be significantly the operation of laws and institutions which con- cheaper than identical branded products But lack trol restrictive business practices of transparency at the point of sale, inconsistency across the EU in how generics are marketed, and Consumers International (CI) works to empower low consumer awareness of generics mean that consumer organisations to identify anti-competi- consumers are not benefiting from the best-value tive behaviour and seek its elimination This report products describes its most recent work – co-ordinating a two-year project to build the capacity to deal with Printer ink competition issues in 14 consumer organisations Alternatives to printer manufacturers’ own ink in Europe Participants have monitored competi- cartridges are increasingly common and are often tion practice in their countries by: much cheaper However, take-up is low and research shows that many consumers not con- • Surveying the retail prices of petrol, paracetamol and ink jet printer cartridges • Assessing national competition regimes and sider alternatives to be the equivalent of the manufacturers’ products Direct and indirect factors can deter consumers their institutional relations with consumer from considering alternatives Competition organisations authorities may need to consider the market The project began in 2005 and was largely funded by the European Commission (DG Health and Consumer Affairs) impact of the use of chips in cartridges by manufacturers to prevent copying or reuse, and of printer warranty conditions which depend on using original brand ink Executive Summary More information comparing printing costs and consumers to promote and benefit from compe- the quality of alternative cartridges would put tition Competition regulation is a relatively new consumers in a better position to make an public policy issue in many countries and it is informed choice Retailers should comply in-store important that the principles of consumer benefit and in-country advertising with international stan- and of consumer representation are recognised as dards that describe cartridges in a comparable laws and institutions are structured and refined way, for instance showing price per printed page Consumers International believes that Petrol co-operation between competition authorities The sale of petrol through hypermarkets and and consumer organisations are mutually benefi- supermarkets seems to have a beneficial effect on cial To be effective, this requires action to remove local competition Many country studies found the obstacles faced by consumer organisations in that prices in other outlets were lower in the representing their constituency on competition immediate vicinity of a supermarket In some issues and to ensure that business practices are countries supermarkets are only just entering the assessed in relation to their effect in enhancing market; this may have a similar impact in the or diminishing consumer welfare This means: longer term • Ensuring that legislation and regulation refers appropriately to achieving consumer benefits Prices are often highest on motorways This is likely to be explained by the fact that once on • Establishing formal rights for consumer organi- the motorway the consumer is to an extent a sations to participate in developing and ‘captive’, with limited choice about which petrol applying competition policy station to visit without significant inconvenience • Enabling them to be effective in this role through training and practical support Legislation survey results • Improving the mechanisms by which individual consumers and consumer organisations Within the EC, national competition laws are not can seek redress for loss resulting from harmonised and differ substantially In particular, anti-competitive behaviour there are variations in: the definition of the consumer and of market dominance; the structure • Supporting programmes to improve individual of the national departments in charge of compe- consumers’ awareness and understanding of tition; the rights of, and opportunities for, competition issues and their avenues for redress consumer organisations and individual consumers where rules are broken to be involved in judicial and substantive procedures; and the extent to which consumer detriment is identified as a measure of anti-competitive practices Consumer organisations face obstacles in participating in the competition regulation; in some cases they not have a recognised role, in others they lack the resources or expertise to engage effectively Both consumer organisations and competition authorities should play a part in empowering Introduction ,Background • The analysis of competition policies, procedures, law and cases from a consumer welfare In an ideal world, competition between businesses benefits both producers and consumers Competition to attract customers can create eco- perspective • Representing consumer interests to competition authorities at national and EU level nomic efficiency, innovation and better quality products at lower prices When this is the case, consumers – and the economy – win Project overview However, competition rarely takes place in this Fourteen national consumer organisations formed perfect environment And when, instead of offer- a multi-country and multi-stakeholder steering ing choices and lower prices, liberalisation leads group, which was co-ordinated by Consumers to the creation of monopolies and cartels, it then International and assisted by experts in competi- denies consumer the very benefits that it is sup- tion law, research methodology, economic posed to promote It is therefore fundamental to analysis, and consumer participation in competi- consumers, and thus to organisations that repre- tion policy (participants and experts are listed in sent consumers, that competition is promoted Appendix 1) The steering group was involved in with the benefit to the consumer in mind all key decisions, such as formulating research criteria and methodologies, to ensure that the Consumers International (CI) has worked on a project met its objectives range of programmes on competition issues over the last five years The objective of this current The research undertaken as part of the project project was to build the capacity of its members and presented in this report is divided into: to provide an informed consumer perspective in competition-related discussions and negotiations, both nationally and internationally Implemented over two years from September 2005, and funded by the European Commission Health and Consumer Protection Directorate-General (DG SANCO), the project promoted consumer welfare in competition policy decision-making in 14 European countries and at the EU level • Market surveillance and data collection • Analysis of competition law, competition policy and other polices with implications for competition Project partners held face-to-face meetings and used electronic list serves for debate, to share their national perspectives and research expertise, and to discuss necessary policy and procedural The specific objective was to build knowledge, decisions Partners were able to learn from each experience and technical expertise in: other as the research progressed and their experi- • Research to establish prices, choice and accessi- ences will contribute valuable guidance both for bility of goods and services within the retail future work by consumer organisations on com- distribution sector petition and for future multi-stakeholder projects Market Surveillance Aim for comparisons to be made The process began with retail sector mapping using a questionnaire, The purpose of the market surveillance pro- followed by a project product discussion and gramme was to: selection, and then preliminary market screening • Train partner organisations to conduct robust of products using a further questionnaire Six price and availability research, an essential skill products were initially identified and then for contributing authoritatively to debates and reduced to three for the full investigation decisions on competition and its impact on consumers • Carry out a practical study on specific consumer products, enabling assessments to be made of the effectiveness of their markets and action Identifying similar products which would be available across 14 countries was a challenge A staged information-gathering approach was adopted, starting with general market informa- which might be needed to deal with barriers tion and refining this to pinpoint products that all to competition participants could research The selection criteria adopted were: • Products must be sold in an identical or very The research process The research was organised in four phases: • Initial screening: – retail sector mapping – product selection analysis and debate – preliminary market screening of six products • Pilot price and availability research similar form (brand, specification, pack size etc) • Products must hold a similar position in the market (similar consumption and popularity levels) • Researchers must be able to gather prices while behaving as ordinary consumers • At least one product should be available from a • Full-scale price and availability research supermarket (to address issues of concentra- • Analysis of results and conclusions tion); one product should be available online; one product should be available for purchase Initial screening cross-border; and one product should raise The aim of the pre-pilot screening was to gather issues about essential access, especially for rural background information about the retail sector consumers in all partner countries and establish where there were common concerns about competition There must be some grounds for suspicion that Partners then worked together to identify prod- there could be problems with competition in at ucts that were sufficiently similar in all countries least one partner country Consumers and Competition Methodology: establishing the framework important to identify: the most popular brands; Gathering background market information competitors and their market shares; any relevant Little variation in the price of a product or service state intervention, other regulations or laws, on its own does not indicate whether competition especially where these might affect imports or is working The greater the competition within a create barriers to suppliers entering the market market, the more vigorous price competition will This information was essential for determining the be Economic theory argues that in a perfectly sampling for the full-scale price collection exer- competitive market, prices will be driven as near cise Some types of outlets and sales methods as possible to marginal cost, leading to near- were important in some countries, but did not harmonised prices Likewise, a market run by a exist in others (for example, the sale of printer ink cartel, in which there is collusion or price-fixing, online, or of paracetamol in supermarkets) It was will also tend towards a single price Therefore, a important that the selection of shops and other single price can indicate both near-perfect compe- sources represented a broad cross-section of the tition, and near-absolute lack of competition So market for all partners, and did not exclude looking at price alone is not sufficient – in order to important local markets what sorts of outlets (including online) people buy from; the methods of sale; the number of assess whether competition is working, the market in question must be defined and then assessed Brands Specific brands for paracetamol and printer ink In the pilot exercise, obtaining market share infor- were chosen for their availability and popularity mation was often problematic; data on leading across the 14 countries HP and Canon cartridges brands and models and sales volumes was not were widely sold in all countries Panadol was available in the public domain In some cases, easily available in most countries; however as the retailers and trade bodies were able to provide research progressed it became apparent that in partial information Some research established Germany, France and Spain other brands would that market research companies held the informa- have to be researched because Panadol was tion but the purchase cost was beyond the unavailable or not for sale in enough outlets For project budget If consumer advocates are to petrol, individual brands were not specified due carry out effective analysis of markets, access to to national variations and because the study was accurate market information is critical; in its not intended to compare brands Instead, part- absence their advocacy role is jeopardised ners were asked to collect prices for major brands and smaller brands Consistency of approach Because of the large number of field researchers Geographical area across 14 countries with different types of retail For petrol it was crucial to examine the market in outlets, different package sizes and different cur- a wide range of areas (urban, suburban, rural, rencies, a consistent approach was required in motorways and close to national borders) The order to gather comparative findings A great investigation of paracetamol covered possible dif- deal of preparation went into determining exactly ferences in product availability and price between the brands and specifications for which partners urban and rural areas Location was not consid- were to gather prices; however it was recognised ered important for printer cartridges that researchers were likely to come across unexpected variations in the field Online retail The extent of the online market for printer ink Market structure and paracetamol varied considerably Therefore, Within each product area, participants gathered sampling from online shops was included, to be information about the market structure It was completed by each country if and as appropriate Competition policy and monitoring ments of competition law but not to bring or actions to stop anti-competitive practices); claims for damages, because they have not suf- appeals against decisions of competition authori- fered any direct harm (as in the Netherlands) ties; preparing amicus briefs – submissions of Under an opt-in model consumer organisations information or interpretation by a third party not are also dependent on the willingness of directly involved in a case (Italy, Slovenia and individual consumers to take part in a case Spain), and the possibility of joining an existing case (France, Denmark, Portugal) • The protection of consumer interest is not recognised as a distinct objective in some national competition rules National laws corresponding to Articles 81 and 82 of the Treaty of Rome define ‘consumers’ not only as end-consumers but also as intermediate customers (businesses which acquire products in the course of their trade).3 In addition, the accepted national interpretation of EC competition provisions is that if a case is made that a restrictive practice will produce benefits The survey indicates that participation of consumer organisations at the ex-ante stage could be as successful (if not more) than ex-post intervention (legal actions and formal complaints) This is because of the relatively lower costs and the relatively lower burden of proof required for consultation submissions – where the issues are in the public domain (for example, the implications of a prospective merger when this for consumers, it is not necessary to show that is notified to the competition authorities) – in these will all go to the end consumers but only comparison with legal proceedings that a ‘fair share’ will be offered to them Ex-post participation of consumer organisations is In contrast to the wording of Article 82 of the also important and one key finding of this survey, Treaty of Rome, not all national equivalent legis- regarding the difficulties consumer organisations lations refers to consumer detriment as a result had in obtaining market share information on of an abuse of a dominant position (for example, paracetamol and ink cartridges, reinforces the need in Italy) This omission reflects the emphasis in some countries on the protection from anti-competitive practices of the interests of intermediate customers rather than of end-consumers for consumer organisations to have access to relevant information in order to represent consumer welfare in discussions over suspected infringements With limited resources and powers of investigation, consumer organisations are likely to face difficulties Consumer organisations can participate in various ways in the competition arena Consumer organisations’ opportunities for participation can be divided into: • Ex-ante (prior to a potential infringement) in obtaining sufficient evidence to demonstrate the existence of anti-competitive practices (such as the operation of price fixing agreements and other restrictive practices abuses of dominant position) and their effects on consumers These include participation in legislative procedures and consultations, and the submission of observations about a proposed merger or a request for exemption • Ex-post (after the alleged infringement Effective participation at the ex-ante stage in issues such as merger control or the exemption of anti-competitive agreements can help prevent the creation of anti-competitive market structures or occurred, or in existing cases which were the establishment of restrictive practices in the first brought, for example, by a competitor or an place, so that the need to seek redress after abuses intermediate customer) Participation may have occurred (ex post) will be reduced Ex ante include: lodging complaints with competition involvement can also help strengthen the attention authorities; seeking redress on behalf of given in competition law, and by competition consumers (such as bringing claims for damages authorities, to the importance of the recognition of 23 Consumers and Competition the consumer perspective in the process of making council/advisory board of the competition authori- and implementing competition policy ty (Denmark, France, Poland); participation in regular meetings (Netherlands) and formal consul- An example of successful ex-ante participation of consumer organisations in legislative procedures has been the involvement of the French partner in the amendment of rules about pricing in the retail tations (Spain); appointment of a national consumer liaison officer (Netherlands, Italy); and the right to submit expert testimonies (France) and reports (Italy and Malta) sector (the Loi Galland case) However, despite the potential effectiveness of ex-ante engagement, the research showed that consumer organisations tend to operate mostly by filing complaints (that is, ex-post) Reasons may include the limitations resource and expertise shortages place on responding to multiple demands and short fixed time limits on responses to consultations, and the absence of a clear formal or informal structure for ex ante participation There is no formal link between competition authorities and consumer organisations in Malta, Slovenia or Germany Consumer organisations face obstacles in participating in the competition arena Despite the various avenues for participation described above, consumer organisations not all engage in competition issues because of limited resources and/or limited access to information Unbalanced representation of interest groups (in some cases there is no legal procedure for on the board of the competition authority their participation) As a result, many consumer may indirectly result in a bias in its priorities and organisations concentrate on providing legal actions For example, in Denmark, only one of 17 advice and education to individual consumers, members of the Danish Competition Council is giving less emphasis to involvement with the appointed on the basis of recommendations of work of competition authorities or in legal cases consumer organisations, while seven are nominat- about competition ed by trade organisations On the other hand, the Polish Council of Good Economic Practices (an In some countries they are directly hampered by advisory and opinion-making body) has equal procedural rules These may include the need numbers of representatives of businesses and for plaintiffs to: consumer organisations (five each out of 15 in total) and the remaining members are chosen for their knowledge and expertise • Seek the consent of many individual consumers where their involvement is necessary for a claim for damages (the opt-in model, described above) There are national inconsistencies in the relations between national competition 24 • Prove ‘direct harm’ in order to establish a authorities and consumer organisations legitimate interest in an issue or case; this may The relationships between competition authorities prevent a consumer organisation representing and consumer organisations vary from country to consumers because it has not itself suffered country In many member states (for example, any loss For example, in Slovenia the con- Cyprus, Czech Republic, Denmark, France, Italy, sumer organisation cannot participate in Lithuania, Netherlands, Poland, Spain and the UK) competition authority procedures or take legal the relationship is institutionalised Arrangements action on competition issues Since individual include: a memorandum of understanding consumers may well not take action them- between the competition authority and the con- selves because of the potential cost and sumer organisation (Czech Republic, Lithuania)4; difficulty, this situation can mean that there is participation of consumer organisations in the no effective means of redress.5 Competition policy and monitoring • Show that they have suffered ‘substantial’ finan- Consumer organisations’ role may be affected by cial injury This also provides a procedural barrier procedural barriers where decisions made by as consumers individually may suffer only minor competition authorities about complaints are not financial damage, even though the loss to them subject to judicial review (for example, collectively is substantial Denmark); or when consumer organisations can • Satisfy criteria designed to ensure that bodies lodge a complaint only when they were part of claiming to represent consumers actually so in the initial procedure; or when an appeal is made practice For example, in Germany, only con- in the first instance to the competition authority, sumer advice centres and consumer the body that made the original decision organisations that are supported by public funds are recognised as legitimate representatives of consumers in competition authority procedures (and then provided that their interests are, or are likely to be, substantially affected) As well as excluding some German consumer organisations from engaging in competition issues, this would also prevent Which? In the UK and similar con- The ability of complainants and other third parties to challenge the competition authority’s decision not to deal with a specific complaint through judicial review is very powerful, since it ensures that it will consider more carefully its decision, knowing that it may have to be defended in court Further-more, even when consumer organi- sumer organisations in other EU countries from sations are officially permitted to appeal against doing so, since they receive no public funds competition authorities’ decisions, this can be difficult to if the competition authority is not Even when consumer organisations are recognised obliged to publish its decisions but only to inform as legitimate representatives of consumers there the parties concerned; consequently, consumer may still be formal restrictions (procedural limita- organisations may not even be aware of such tions) on their participation For example, they may decisions (for example, when they did not issue be limited to action to stop an anti-competitive the initial complaint) practice (and not able to make claims for damages, see above), or be unable to seek damages unless Consumer organisations’ powers under the competition authority has decided that market competition laws tend to be limited in abuse has taken place comparison to their powers under consumer Consumer organisations may still face difficulties in pursuing a representative damages claim on behalf of named individuals (as required under the opt-in model) as consumers will most likely be reluctant to join such a claim The existence of an opt-out model (which was adopted in Portugal and Cyprus), according to which consumer organisations can bring actions on behalf of the general interest of consumers without the need to join to the action, may overcome this obstacle protection laws In some member states some of the obstacles faced by consumer organisations have been remedied in relation to consumer protection legislation, but not for competition legislation For example, the Enterprise Act of 2002 enables a consumer organisation in the UK to be given enforcement powers for some aspects of consumer protection, but not for competition issues The Polish Code of Civil Proceedings enables organisations to present their views to the court In other instances, consumer organisations will in a form of resolution or statement only in con- be granted a standing right (ability to seek sumer protection cases and not in competition redress in judicial procedures) only after it has cases Consumer organisations’ greater proce- made ‘sufficient attempts to achieve the objec- dural rights under consumer protection law may tives of the actions through consultation with the signal a higher degree of recognition (legitimacy) defendant’, or when the competition authority of consumer organisations’ participation in their has failed to act (Czech Republic) ‘traditional’ territory 25 Consumers and Competition Competition authorities will tend to consider Improving public information and awareness the harm to consumers only when the As part of the research for this programme, par- market under consideration is directly ticipating organisations assessed aspects of public oriented to final consumers awareness of competition law and cases They did Competition authorities tend to concentrate on the not carry out new field surveys but reviewed their interests of end-consumers only when a particular own observations and experiences of the press practice is expected to have direct implications for and of consumer attitudes, rating the latter on a them – such as those related to utilities and five point scale telecommunications, including mobile phones (for example, in Denmark, Cyprus and the Czech Media coverage was reported in all countries, but Republic) and specific retail markets (the retail food considered most comprehensive in France, sector in Cyprus and Denmark) Consumer organi- Cyprus, Lithuania, Slovenia and Portugal, and sations, understandably, also mostly make least so in the Czech Republic, Denmark, complaints when ordinary consumers have appar- Germany, Malta and Poland Potential consumer ently suffered direct harm For example, in November 2005, three French mobile phones operators were accused and found guilty of exchanging strategic information in order to stabilise their respective market shares between 2000-02 and for simultaneously increasing their retail prices The French Competition Council ordered them to pay a global fine of 543 million euros Following this development the French consumer organisation UFC-Que Choisir brought private actions on behalf of French consumers in October 2006 In other ‘rip-off’ stories on popular products and services tend to get most attention – for example, match tickets and replica kit for football, gas suppliers, tour operators, mobile phones, retailing, taxis and dentists The start and end of cases received most cover, as did those involving major national industries or interests General media reporting most often emphasised price issues, with complex cases and legal analysis likely to be confined to the specialist and economic press This can limit consumer awareness – in France, for example, anti-competitive agreements between banks instances, competition authorities will concentrate received modest media coverage even though on the effect of a practice on the interests of their effect could have been to restrict the intermediate customers and competitors availability of credit for consumers Generally, participant organisations under- Participants noted that media reporting did not stand the important competition issues in always endorse the views of the consumer their countries organisations Organisations will benefit from further training about the concept of consumer ‘harm’ and its interpretation by their national legislation, competition authorities and the courts This is not Participants in eight member states reported a good level of awareness of competition issues (scoring 4-5 from a scale of out of 5), while in other countries the level of awareness was rela- surprising since the issues are technical and cov- tively low (1-2) In general, consumer awareness ered by competition laws which are still vigorously was lower in new member states than in the debated by experts older member states Understandably, awareness of competition cases was mostly considered higher than of competition law and principles, but no significant connection was found between this and the comprehensiveness of media coverage 26 Competition policy and monitoring This overview illustrates the importance for consumer organisations of seeking, targeting and managing media coverage of competition issues and cases Public awareness and support are important factors in their work in informing consumers on their actions and raising consumer awareness on the importance of competition to their daily life FOOTNOTES Under Article 74 of the Slovenian Consumer Protection Act, consumer organisations can challenge all kinds of illegal contractual terms, but not including cases where there are breaches of the competition law Kamiel Mortelmans and Stewart Watson, “The Notion of Consumer in Community Law: A Lottery?” in Julian Lonbay, ed., Enhancing the Legal Position of the European Consumer (BIICL, London 1996), p.38 European Consumer Consultative Group (ECCG), SubGroup for Competition Group A on “Dialogue with Competition Agency” (15 November, 2006) unpublished report, a copy is with the author Individual consumers will be unlikely to seek redress due to the relatively high costs of seeking redress (including time and money) in comparison to the minor damage incurred by each individual consumer; the tendency of consumers to concentrate on their productive activity (or income) and the uncertainty concerning the standing right of indirect purchasers in antitrust claims Orit Dayagi-Epstein, “Representation of Consumer Interest by Consumer Associations – Salvation for the Masses?” (2007) 3(2) Competition Law Review 209, 211-212, 229, 234 and the references there 27 Conclusions Institutional and legal framework member states where a single authority is respon- The institutional and legal framework for promot- Evidence from the survey about consumer ing competition and eliminating restrictive organisations’ participation in legislative proce- practices should encourage consumer involve- dures, consultations and submission of reports ment in setting policy, in monitoring the market suggests that ex-ante involvement has been more for abuses, and in seeking rectification and successful than ex-post (judicial procedures and compensation when they occur complaints) This is due to the lower costs and sible for both functions burden of proof of consultations procedures in The research carried out by consumer organisa- comparison to judicial procedures Regarding ex- tions in 14 EU countries for this programme post procedures, consumer organisations also identified significant differences in competition face difficulties in obtaining evidence of anti-com- law which directly affect, and limit the role which petitive infringements such as restrictive practices individual consumers and consumer organisations and abuse of dominant position Therefore, they can play Governments and national competition need better access to relevant information in authorities should recognise the order to fully participate positive contribution which consumer action can make to promoting competition and where The underdevelopment of collective redress leads necessary change laws, regulations and proce- to a greater dependency of consumers on the dures to remove barriers to participation activities of competition authorities Public enforcement mechanisms cannot operate as a 28 The institutional structures of competition substitute for private initiatives as private and enforcement and consumer protection agen- public enforcement often have different objec- cies also vary from country to country, and this tives Public enforcement is more concerned affects the manner in which consumer interest is with the removal of impediments to competition considered A unified approach to consumer pro- and hence concentrates on termination of the tection and competition could be one solution in infringements, structural remedies or punish- addressing this issue Simplifying the responsibility ment of the infringers Private enforcement for enforcement by bringing together relevant concentrates on the protection of consumers’ authorities will reduce the burden on consumer property rights which were harmed by anti- organisations which seek to support and encour- competitive conduct and seeks remedies based age their work The benefits of an integrated on private law branches (for example, tort and approach to competition and consumer protec- restitution) Accordingly, the absence of collec- tion has been recognised in eight out of the 14 tive private remedies may harm the protection of Conclusions consumer interest, especially when it is unlikely consumers are involved in this discussion and that individual consumers will be able or willing assurance required that all relevant stakeholders, to seek redress not only those with vested interests – such as pharmacists or drug companies - can participate Specific recommendations are made for improve- equally in the debate ments at the national and EU levels Practical support for consumer organisations, which are mostly very short of resources to take on compe- Printer ink cartridges tition issues in the public interest, should also be Alternatives to printer manufacturers’ own brand- considered ed cartridges are increasingly common and mostly much cheaper The market thus appears Specific markets to be openly competitive However, take-up of alternatives is low and research shows that many consumers not consider other brands or Studies of the availability and prices of three con- unbranded products as directly equivalent substi- sumer products across the 14 countries identified tutes for the printer manufacturers’ products regulatory barriers to competition They also illustrated the importance of improving consumer Printer manufacturers may seek to secure their information and advice to encourage and enable ‘after market’ for ink cartridges by the use of individuals to be proactive in seeking best value electronic chips to prevent copying or remanufac- (ie making informed choices) turing – a direct barrier to competition – and by warranty conditions which seek to discourage the Paracetamol use of other cartridges For consumers, direct Generic paracetamol is usually significantly cheap- value-for-money comparisons are not straightfor- er than branded products such as Panadol ward since cost in use and print quality are However consumer awareness of the generic difficult to assess product is low in most countries so that sales tend to be modest The research leads us to consider two important questions; firstly how important the need is for a harmonised EU policy on the sale of paracetamol and secondly if harmonisation is important which factors should be considered in this process in Petrol Petrol prices vary less than those for paracetamol and printer ink within individual national markets because a high proportion of the pump price is tax Where taxes vary significantly, there is some cross-border shopping order to ensure the highest standards of consumer rights are respected The research shows that in the Netherlands where generic paracetemol is freely available, and consumers are aware of its existence, it is more popular than its branded equivalent However in this market, other factors such as consumer protection, access to independent information as well as price, and availability need to be considered and balanced within the debate over whether EU harmonisa- The sale of petrol through hypermarkets and supermarkets seems to have a beneficial effect on local competition In many countries prices were low in the immediate vicinity of a supermarket Prices are often highest on motorways This is likely to be explained by the fact that, once on the motorway, the inconvenience of seeking alternatives to its service areas makes consumers a semi-captive market tion over the sale of paracetamol is desirable or even feasible It is essential that Consumer Organisations, as experts and representatives of 29 Recommendations To improve the competition environment: Governments and national competition authorities should: • Introduce a ‘super-complaint’ mechanism, such as that provided for in the UK Enterprise Act 2002, giving designated consumer organisations the right to make formal complaints about general detrimental features or practices in the market and about specific alleged infringements Provide consumer organisations with more of competition rules This provides them with a avenues for participation statutory role in setting the competition authorities’ agenda if, as in the UK, it is obliged to • Formally recognise representative consumer respond to a complaint within a fixed period organisations as legitimate stakeholders (ie as parties with a ‘legitimate interest’) in competition authority procedures and in the judicial system Consumer organisations should be involved in deciding the criteria for recognition • Commit to actively supporting co-operation between consumer protection and competition enforcement agencies, for example by building common information resources on consumer behaviour and consumer complaints • Introduce effective collective redress mechanisms such as representative follow-on claims and stand alone claims Collective action should not require the direct participation of a large group of individual consumers – an ’opt out’ approach should be adopted Collective redress should not be limited to seeking compensation after an infringement has occurred but include actions to stop on-going infringements (injunctive relief) • Strengthen institutional commitment to ensuring that consumer perspectives are taken into account Mechanisms should include formal agreements (for example, memorandums of understanding) with consumer organisations setting out expectations on both sides, and the designation of a consumer liaison officer, with appropriate resources, within the competition authority to act as a single point of contact for consumers and consumer organisations • Ensure that consumer organisations can appeal against decisions made by the competition authorities Remove obstacles to effective participation by consumer organisations • Ensure that consumer organisations play a significant and meaningful role at the ex-ante • Ensure that sufficient time is allowed in consul- stage in legislative procedures and tation, appeals and other procedures in consultations recognition of the limited resources available to consumer organisations 30 Recommendations • Enable consumer organisations to receive The European Commission should: funding for their competition activities, for example through fines received for competi- Encourage member states to recognise the tion infringements, awarding compensation ‘legitimate interests’ of consumer organisa- damages to the organisation itself, or legal tions in competition regulation and to adopt processes such as legal aid and conditional national measures consistent with the above and contingency fees recommendations • Establish mechanisms to improve consumer organisations’ access to market information Adopt similar measures in relation to compe- currently restricted on grounds of commercial tition regulation at the EU level confidentiality or because of the high cost of acquiring commercial market research • Establish collective redress mechanisms and remove obstacles for effective consumer Give full weight to the interests of the end user – the ordinary consumer – in competition analysis and cases • Ensure that competition law and the framework for investigations refer specifically to impact on the demand side of market activity in general, and the final consumer in particular, to avoid bias towards the supply side or intermediate customers Support and encourage action to raise public awareness of competition issues, the proactive contribution which consumers can make through their shopping choices, and their rights if they are the victims of restrictive practices • Establish joint consumer education and awareness projects with consumer organisations • Encourage media understanding of, and interest in, competition principles and individual competition cases participation in judicial procedures • Establish a ‘super-complaint’ mechanism • Support co-operation between EU consumer protection and competition agencies, for example by building common information resources on consumer behaviour and consumer complaints • Give consumer organisations a formal role in the development of competition policy, for example through transparent consultation procedures • Appoint and allocate resources to the consumer liaison officers for competition and consumer protection and fully integrate these positions in departmental policy making • Encourage and support, with financial help, national consumer education and information programmes to raise awareness and understanding of competition issues • Encourage and support information sharing and research collaboration between consumer organisations on prices, product availability, consumer complaints and other factors related to the operation of transparent and competitive markets 31 Consumers and Competition Consumer organisations should: Printer ink cartridges Consumer organisations should continue their Maintain and improve their technical abilities regular tests and comparisons of cartridges and and understanding of competition law in seek maximum publicity for the results general and of the principles and interpretation of consumer detriments in particular Governments, consumer protection and competition authorities should therefore encourage Develop media strategies to improve con- cartridge manufacturers to provide comparative sumer awareness of the existence and information on their packaging and in content of the competition rules and their advertisements, computed in accordance with day-to-day implications in the high street internationally agreed assessment methods (ie as and to encourage competition authorities to formulated by the International Organisation for operate in the consumer interest Standardisation – ISO) If producers will not this on a voluntary basis, it should be a mandato- Establish constructive formal and informal ry requirement at national and/or EU level, relations with competition authorities, following the precedents set by, for example, emphasising the mutual benefits of such co- energy labels, nutrition labels, car fuel consump- operation, such as partnership in competition tion data, and true interest rates advocacy and consumer education campaigns Petrol Facilitate and encourage consumers to exer- Governments and competition authorities cise informed choice in the market and assist should monitor the petrol market closely since them to switch to better providers in most countries distribution is dominated by a small number of major companies They should also review the basis on which licences are grant- To improve specific markets ed for motorway petrol stations and the freedom which suppliers have to set high prices at them Paracetamol Governments and competition authorities Governments, competition authorities and should consider the need for, and consequences consumer organisations should support and of, restrictions on the sale of paracetamol, publicise new sources of consumer informa- taking full account of advice from consumer tion about petrol prices, such as internet sites organisations as well as other stakeholders listing prices forecourt by forecourt Consumer organisations should encourage the use of generic paracetamol, and raise consumer awareness – through the media and other means available to them – that they are direct equivalents of branded products, made to internationally recognised formulae and quality standards 32 Appendix I Project participants Cyprus Kypriakos Syndesmos Katanaloton (Cyprus Consumers Association) Czech Republic Sdruzeni Obrany Spotrebitelu Ceske Republiky (SOS Consumers Defence Association Of The Czech Republic) Denmark Forbrugerrådet (Danish Consumer Council) France Consommation, logement et cadre de vie (CLCV) Germany Verbraucherzentrale Bundesverband (VZBV – Federation of German Consumer Organisations) Greece New INKA (New Consumers’ Institute) Italy Centro Tecnico Regionale Di Ricerca Sul Consumo Europeo (CTRRCE – Regional Technical Centre For Research On European Consumption) Lithuania Lithuanian National Consumers Federation Malta Ghaqda Tal-Konsumaturi (Consumers’ Association) Netherlands Consumentenbond (Consumers’ Association of Holland) (project expert in research methodology) Poland Stowarzyszenie Konsumentow Polskich, Skp (APC Association Of Polish Consumers) Portugal Associaỗỏo Portugesa Para A Defesa Do Consumidor (DECO – Portuguese Association For Consumer’s Protection) Slovenia MIPOR – International Consumer Research Institute Spain Mag Estudios De Consumo, S.L (Mag Consumers’ Studies Centre) UK Which? (project experts in economic analysis) UK The British Institute of International and Comparative Law (BIICL) (project experts in competition law) UK Kate Scribbins – (project expert in research methodology) Orit Dayagi-Epstein (project expert in consumer participation in competition policy) 33 Appendix II Results tables for the petrol survey Petrol prices collected in the 14 countries participating in the survey (euros per litre 95RON unleaded)6 Cyprus petrol prices Czech petrol prices 1.40 1.40 1.20 1.20 1.00 1.00 0.80 0.80 0.60 0.60 0.40 0.40 0.20 0.20 0.00 0.00 Location Location Denmark petrol prices France petrol prices 1.40 1.40 1.20 1.20 1.00 1.00 0.80 0.80 0.60 0.60 0.40 0.40 0.20 0.20 0.00 0.00 Location Location Legend Urban area Urban area Suburban area Suburban area Rural area Rural area Motorway Border area 34 Appendix II Germany petrol prices Greece petrol prices 1.40 1.40 1.20 1.20 1.00 1.00 0.80 0.80 0.60 0.60 0.40 0.40 0.20 0.20 0.00 0.00 Location Location Italy petrol prices Lithuania petrol prices 1.40 1.40 1.20 1.20 1.00 1.00 0.80 0.80 0.60 0.60 0.40 0.40 0.20 0.20 0.00 0.00 Location Location Malta petrol prices Netherlands petrol prices 1.40 1.40 1.20 1.20 1.00 1.00 0.80 0.80 0.60 0.60 0.40 0.40 0.20 0.20 0.00 0.00 Location Location Legend Urban area Urban area Suburban area Suburban area Rural area Rural area Motorway Border area 35 Consumers and Competition Poland petrol prices Portugal petrol prices 1.40 1.40 1.20 1.20 1.00 1.00 0.80 0.80 0.60 0.60 0.40 0.40 0.20 0.20 0.00 0.00 Location Location Slovenia petrol prices Spain petrol prices 1.40 1.40 1.20 1.20 1.00 1.00 0.80 0.80 0.60 0.60 0.40 0.40 0.20 0.20 0.00 0.00 Location Location Legend Urban area Urban area Suburban area Suburban area Rural area Rural area Motorway Border area FOOTNOTE The organisations aimed to collect prices for each area but where this was impossible as there were not a sufficient number of stations, they collected as many as possible 36 Consumers International 24 Highbury Crescent London N5 1RX, UK email: consint@consint.org www.consumersinternational.org ... part of a year project ? ?A Consumer Welfare Analysis of the retail Distribution Market in EU Member States? ?? which was co-ordinated by Consumers International and involved the participation of 14 European... method of sale of paracetamol and availability of paracetamol between urban Paracetamol restricted to sale in pharmacy only and rural areas A single market? Cyprus The research showed that the markets. .. more information, visit: www.consumersinternational.org Consumers and Competition: A consumer welfare analysis of three retail markets in 14 EU member states ISBN: 1-902391-65-9 Published by Consumers